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Kazakh Development Bank Plans $1 Billion Loan Sale to State Fund

Development Bank of Kazakhstan JSC, a state-owned lender that promotes industry, plans to sell 151 billion tenge ($1 billion) of bad loans to government-controlled Investment Fund of Kazakhstan.

Development Bank wants to sell the loans at a discount equal to the amount of provisions set aside to cover potential losses, Deputy CEO Mirzhan Karakulov said by phone today from the Kazakh capital, Astana. The assets will be transferred by year-end so the bank will be eligible for tax breaks, he said, without naming the discount.

Kazakh lenders are still weighed down by souring assets four years after central Asia’s biggest energy producer used $10 billion from its oil fund to support banks and companies following a credit squeeze and collapse in property prices. The country’s financial industry is “handcuffed” by non-performing assets and needs to repair its balance sheets faster to free up resources, the International Monetary Fund said in November.

Development Bank’s loan-loss reserves amounted to 130 billion tenge last year, or 27 percent of total lending, compared with 31 percent in 2011, according to its website. Its loan holdings rose to 474 billion tenge last year, an increase of 73 billion tenge from 2011, the bank said.

Investment Fund is expected to pay cash for the loans in about five years, according to Karakulov.

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